Jan. 9 (Bloomberg) -- Marks & Spencer Group Plc reported a
10th straight quarter of falling clothing sales amid discounting
over Christmas and after an unseasonal October held back sales
of warmer-weather clothing.

Non-food sales at stores open at least a year fell 2.1
percent in the 13 weeks ended Dec. 28, the London-based company
said in a statement today. That’s worse than the median estimate
for unchanged sales in a Bloomberg News survey of 19 analysts.
Food sales rose 1.6 percent on that basis, less than the 2
percent anticipated by the analysts surveyed.

Promotional activity for general merchandise means the U.K.
gross margin for the full year will be broadly unchanged from a
year earlier, Marks & Spencer said. The company slashed prices
by as much as 50 percent on some items ahead of the Christmas
holiday, which helped boost general merchandise sales 0.5
percent in the run-up to the event. Still, it failed to match
growth reported by clothing competitors Next Plc, John Lewis and
House of Fraser.

“This has left everyone wondering when the big turnaround
is going to materialize,” said Bryan Roberts, an analyst at
Kantar Retail. “There was a lot of fanfare over the
autumn/winter range which obviously hasn’t resonated with the
public. They obviously got nervous in the run-up to Christmas.”
Heavy discounting “is the only reason the Christmas numbers
are up.”

The company said it remains “cautious” on its outlook,
given the economic environment.

Marks & Spencer fell 1.4 percent, to 438.9 pence at 8:02
a.m. in London. The shares gained 13 percent last year, trailing
a 33 percent increase in the FTSE 350 General Retailers Index,
the main benchmark for U.K. retail stocks.

Apparel Underperformance

The sales decline reflected Marks & Spencer’s continued
underperformance in the U.K. apparel market. Sales grew 0.2
percent in the 24 weeks ended Nov. 24, Jamie Merriman, an
analyst at Sanford C. Bernstein, wrote in a Dec. 30 note, citing
data from researcher Kantar that is not publicly available. That
compared with total market growth of 0.9 percent, she said.

Milder weather in the run-up to the holiday held back the
retailer’s sales of full-priced merchandise, Cantor Fitzgerald
analyst Freddie George said in a note to investors.

“The strategy of reducing the number of lines and backing
the winners, which are highly geared to a cold weather
environment, including cashmere and coats, appears to have
backfired as the result of the milder-than expected weather over
the past two months,” George wrote before the results were
published today.